Russian-Armenian Gas Talks ‘Not Over’

The Armenian government and Russia’s Gazprom energy giant are continuing to negotiate on the new price of Russian natural gas supplied to Armenia, Energy Minister Armen Movsisian said on Wednesday, contradicting earlier reports about agreement reached by the parties.

A Gazprom spokesman and the chief executive of Armenia’s ARG gas distribution network, Karen Karapetian, told RFE/RL on July 15 that they have agreed on how much Armenia should pay for gas next year. But they declined to disclose the new price. Karapetian said only that the price hike will not be drastic.

ARG, in which Gazprom has a controlling stake, currently purchases gas from its parent company for $110 per thousand cubic meters. The Russian gas monopoly announced recently its intention to gradually raise the price to international levels currently exceeding $200 per thousand cubic meters.

Movsisian confirmed that the Russians want to charge Armenia $165 per thousand meters starting from January 2009. He told journalists that the two sides are continuing their talks and could sign a three-year deal in September.

According to Karapetian, the Armenian government is ready to exempt imported Russian gas from value-added tax and thereby reduce its cost for ARG by 17 percent. The ARG chief said the exemption would stem from a Russian-Armenian agreement on avoidance of double taxation.

Russia has long been Armenia’s main supplier of natural gas, which generates more than one third of the country’s electricity and is the main source of winter heating for Armenian households. The Russian monopoly on the vital deliveries will end with the anticipated completion by the end of this year of the second and final section of a gas pipeline from neighboring Iran.

With Russian gas essentially meeting Armenia’s needs, it is still not clear when Iran will start pumping gas through that pipeline. It is expected that the bulk of Iranian gas will be converted into electricity which will in turn be exported to the Islamic Republic.